IRS Issues Employee Retention Credit Guidance for 2020
The Employee Retention Credit (ERC) became more relevant for many employers with the passage of recent tax laws. The credit is now eligible for Paycheck Protection Program (PPP) borrowers and the credit extends through December 2021.
The IRS recently issued guidance on the 2020 credit, such as eligibility requirements and detailed explanations of how the credits are calculated. The maximum 2020 credit is $5,000, based on 50% of wages up to $10,000 per employee per year. While enlightening, the rules provided by the IRS are numerous and their examples offer unique situations that businesses and their advisors will need to address.
The IRS has not issued guidance on the 2021 credit. The 2021 credit is based on 70% of wages. Only the first $10,000 paid to each employee per quarter qualifies. The maximum 2021 credit is $28,000 per employee ($10,000 max wages per quarter x 4 quarters x 70%).
Copeland Buhl is in the process of developing tools and calculation methodology for claiming the 2020 credit. Copeland Buhl representatives will be in contact with our business clients in the upcoming weeks to offer assistance on this topic.